Customer Optimization: A Holiday Primer

The holiday season is nearly upon us, and fourth-quarter programs are in full swing. The pressure to maximize revenues and reduce costs continues this year as marketers look to leverage existing resources to generate more revenue per customer than in years past.

Holiday Spending
Even though the overall economy is showing minimal odds of turning around anytime soon, not all is gloom and doom. Consumer spending represents approximately two-thirds of the U.S. economy, and it looks like many wallets will snap open as we approach the critical holiday shopping season.

Several promising signals over the last few weeks portend a strong fourth quarter. Among the most encouraging is BizRate.com's projection that e-commerce sales for Q4 2002 will increase 35 percent over Q4 2001 to reach $16.9 billion. This follows a strong $10 billion Q3 2002 for online retail sales. What makes this prediction even more cheering is the six fewer shopping days on this year's holiday calendar.

Why this expected increase in fourth-quarter spending? Many people are simply more comfortable shopping online. Citing reasons from improved customer experiences to greater faith in credit card transaction security, many consumers believe online shopping is convenient, safe, and wallet friendly.

Email marketers must seize on this increased comfort. One of the key drivers of improved fourth-quarter revenue is pushing consumers to start shopping earlier, then continuing that push through the remainder of the season.

Email as a Push-Marketing Tool
As we've proven in the past, email used as part of an integrated approach is one of the most effective and efficient push-marketing tools.

The evolution of email marketing over the past year has been astounding. Marketers have rushed like never before to build email databases, consolidate internal marketing intelligence, and build strategies to better understanding and communicate with customers. We've seen the development of comprehensive preference pages and surveys, the rise of tactics such as email append, and a greater overall attention relevance.

What have we learned, and what will marketers be doing this holiday season? Here are eight email "gifts," presented step by step, to help you optimize revenue per customer and make your cash registers ring this fourth quarter.

1. Make Your List...
Review and analyze your current customer and prospect databases. Clean up your customer file as well as your prospect list. Create a model based on your best customers, then execute an acquisition campaign based on that model.

2. ...And Check It Twice
Make sure your databases are centralized and provide a true 360-degree view of each customer. It's critical to include transactional, historical, and behavioral data on each customer to create and deliver tailored, relevant messaging.

3. Segment That List
Drill down into your list for a deep understanding of your customers. After performing your initial list analysis, build your segments from the intelligence you've gathered from your database. Construct segments based on models, individual attributes, or historical data such as previous purchase behavior.

4. Package and Tag
As consumers become increasingly savvy, it's vital to cluster your efforts around what has and has not worked in the past. Modify those results to craft more hard-hitting campaigns the next time around. Each segment deserves its own targeted promotion, and today's email technology can help you deploy on the fly dynamically generated content for each segment. In terms of offers, keep in mind that discounted or free shipping deals tend to outperform other promotions during the holiday season.

Having a preexisting relationship, offering value, and building relevant, personalized communication will get you noticed and opened in a sea of emails. In addition, every message is an opportunity to learn more about your customer base. Review, track, and analyze every link. Implement analytic tools that will bring additional intelligence from click-stream data outside the email itself.

5. Develop a Response/Nonresponse Strategy
Response (and nonresponse) data is one of the great influencers of ongoing campaigns. Map out a strategy that addresses those who respond, and those who don't, each step of the way. If someone fails to respond to your initial campaign, test additional variables and alter your next effort to better pique the recipient's interest. For those who do respond, determine the next step in their path toward a sale (or additional sale, if you've generated a transaction with the initial effort). Set up triggers and automate your messaging according to your response strategy road map. The speed, flexibility, and customization abilities of email uniquely enable marketers to execute detailed response strategies, even in a compressed time frame.

6. Integrate With Other Media
Email in a vacuum seldom outperforms an integrated approach. Strategically construct your customer communication streams so each marketing medium complements and supplements the next. The multichannel approach is also catching on beyond marketing for the holiday season. According to Jupiter Research, 19 percent of retailers this quarter are permitting customers to order products online and pick them up at physical retail locations, compared to 12 percent in Q4 2001.

7. Send Service Notifications
Shipping notices, thank-you messages, and cross- and up-sell messaging have become critical in retail. Customers have come to expect service notifications in e-commerce, and marketers that don't offer them are at a disadvantage. In fact, an alarming number of companies fail even to acknowledge receipt of a customer inquiry and respond to the request in timely fashion. Jupiter Research recently found that nearly one-third of companies either took three days or longer to respond to customers' email inquiries or never responded at all.

This problem can easily be solved with automated messaging tied into e-commerce systems. Fulfilling these basic customer service needs improves customer attrition rates and overall loyalty.

8. Analyze, Optimize, and Research: Close the Loop
All the intelligence generated by email marketing - response data, transaction data, and behavioral data - must be collected and flowed back into a central repository. There it can be analyzed and used to build benchmarks and best practices for future efforts.

There you have it. Every new program through the customer lifecycle adds an important piece to this often complex and ever-changing puzzle. Understanding the impact your email communications have on your brand will be increasingly important in the coming years. Conduct research to determine how your various segments react to messaging. What is their purchase intent? How has your brand favorability with customers changed over time? Knowing the answers to these questions will allow you to truly maximize customer relationships later on.

Al DiGuido is chief executive officer of Bigfoot Interactive, a provider of strategic, ROI-focused email marketing services and technology. Previously, he served as CEO of Expression Engines, executive vice president at Ziff-Davis, and publisher of Computer Shopper, where he launched ComputerShopper.com, a groundbreaking direct-to-consumer e-commerce engine. Prior to Ziff-Davis, he was vice president/advertising director for Sports Inc.